Week in FX Asia – Bank of Japan Dissapoints Markets with Inaction Yen Rises

This week the Bank of Japan found out just how harsh and fickle a mistress the market can be. The BoJ was the darling of the market and the shining example of how a central bank should intervene. Tuesday Governor Haruhiko Kuroda and the Japanese currency suffered the brunt of the market’s criticism for their lack of action. The currency rose to 96 and has continued to rise as the week progressed. There were expectations that the BoJ would increase its monetary stimulus.

Comments from the influential Mr. Yen summed up the feeling around Prime Minister Shinzo Abe’s third arrow of reform. Eisuke Sakakibara is pessimistic given the proximity of elections. Abe can’t introduce new reforms until fall to avoid compromising the results of the elections. Abe’s bold statements and follow through by Kuroda was seen as the one-two punch needed to get Japan back on track, but the expectation was that they would not stop there.

Sakakibara does not expect reforms before or after the election and adds his voice to the critics of Abe’s third arrow of reform as the first arrow of BoJ intervention is lacking in long-lasting impact.

Next week Japan will continue to be part of a G8 meeting where there could be rumblings of currency intervention. Although with the current state of the Yen this is less likely as the weakening could be unsustainable. The G8 might have suspected this from the start. Industrial production indicators will be released as well as foreign investment which will give insight on how well Abenomics is working on the real economy and investment.



* AUD RBA Meeting’s Minutes
* GBP Core Consumer Price Index
* GBP BOE Inflation Letter
* USD Consumer Price Index
* GBP Bank of England Minutes
* USD Fed Interest Rate Decision
* USD FOMC Economic Projections
* USD Fed’s Monetary Policy Statement and press conference
* EUR Producer Price Index
* CHF SNB Interest Rate Decision
* BOE Bank of England Minutes
* CAD Bank of Canada Consumer Price Index

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza